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Shares of Potash Corp. of Saskatchewan (POT) were down by about 4% in morning trading Thursday after Canada, in a surprise move, provisionally blocked BHP Billiton's (BHP) $38.6 billion bid to buy the company, and it appears unlikely that the government, focused on protecting national assets and natural resources, will change its mind later.

Industry Minister Tony Clement said the Anglo-Australian mining company had not satisfied the requirement that such a large foreign investment create a "net benefit" for Canada. While Canada gave BHP 30 days to come up with a better proposal for the world's largest fertilizer producer, the chances of the company making a successful modified offer appear remote, Reuters reports.

Of course, this sparked a debate over free markets vs. protectionism. Under the Investment Canada Act, a foreign takeover must benefit the country in terms of jobs, exports, production and investment, but the Canadian federal government has only once before used the act to block a foreign takeover. In 2008, it prevented the purchase of aerospace company MacDonald Dettwiler and Associates by U.S.-based Alliant Technology, according to the Canadian Globe and Mail. The government took the opposite approach to the protectionism issue in 2009, when bankrupt Nortel Networks sold a collection of new wireless technology patents to Sweden's Ericsson for $1.1 billion (Canadian), despite the objections of Ontario's provincial government that the taxpayers had financed the technology's development.

The Canadian government has also approved takeovers of three of the nation's biggest mining and steel companies over the past several years. Potash controls more than a fifth of the world's reserves of potash, a key ingredient in fertilizer, and is considered an important global price-setter.
A Deeply Conflicting Issue

A recent Globe and Mail poll of Canadian business executives found a nearly equal split between those who said they were concerned about the government's action and those who weren't.

"I find myself very conflicted by this issue," Ian Telfer, chairman of Goldcorp (GG) told the Globe. "As a long time proponent of free markets it pains me to see governments interfere in the movement of capital. However, as a proud Canadian .... I agree with the decision and I am very pleased that Canadians will continue to have the opportunity to invest in these unique Canadian assets for decades to come."

Canada is not the first nation to block such asset sales, especially when it comes to natural resources. Just last year, it was the Australian government that blocked a mine sale to China, citing national security concerns. Similarly, a Chinese company withdrew its bid for Nevada's mining company Firstgold after it became clear the U.S. might object because of security concerns, though some Firstgold investors accused the government of "anti-Chinese protectionism."

Hooray for Canada! I think that it is both foolish and dangerous to allow foreign entities to purchase strategic assets. Many power and communications facilities in the US are no longer American owned. Other than a boost to stock price, how is this advantageous to the American public who depend on these services? Why on earth would you want a foriegn company, solely interested in maximizing profits, to own large chunks of your power grid?